Non-disparagement pacts: Why corporate governance norms could take a hit

Legal experts point out that the idea behind the clause is to protect both the company and the director from reputational risk

The practice of companies entering non-disparagement agreements with departing board members is raising questions related to transparency and breach of corporate governance norms. 

Non-disparagement pacts are not inherently illegal and most visible in severance agreements and commercial contracts that involve senior executives, say HR experts. But the presence of these provisions display a rising trust deficit between companies and departing directors, say proxy advisory firms. 

IT bellwether Infosys Ltd disclosed in its 2018 Annual Report that it had entered non-disparagement pacts with three former board members, including former chief executive Vishal Sikka, as part of their exit agreements. 

However, proxy